The New Engineering Contract (NEC), or NEC Engineering and Construction Contract, is a formalised system created by the UK Institution of Civil Engineers that guides the drafting of documents on civil engineering, construction and maintenance projects for the purpose of obtaining tenders, awarding and administering contracts.Gerrard, R., Relational Contracts - NEC in Perspective, Lean Construction Journal, vol 2, #1, April 2015, archived 3 August 2019, accessed 6 February 2024Brook M. (2004). Estimating and Tendering for Construction Work Butterworth-Heinemann NEC has become the default suite of contracts for public-sector works, services and supplies in the United Kingdom and Hong Kong. NEC contracts have also been successfully used in Australia, Ireland, the Netherlands, New Zealand, Peru, the Philippines, South Africa, UAE, and many more. They are also increasingly being used in the private sector.
There have been four editions, the first in 1993, the second in 1995, the third in 2005 and the most recent in 2017. The NEC3 was launched in 2005 and it was amended in April 2013. The NEC Users' Group, with over 400 members worldwide, brings together organisations and individual users of the NEC contract suite to exchange knowledge and best practice.NEC, NEC Users’ Group, accessed 2 May 2021
History Originally contracts in the civil engineering and construction industries were bespoke and drafted by Chancery pleaders using their knowledge of leases rather than building processes. In 1879, Royal Institute of British Architects for construction projects created RIBA forms which lead to the Joint Contracts Tribunal, JCT forms. For civil engineering the need for a formalized approach to contracts led the Institution of Civil Engineers (ICE) to produce a formalised set of conditions of contract. In 1986, the ICE commissioned the development of a new form of contract as it was felt that there was a need for a form that had clearer language, clearer allocation of responsibilities and reduced opportunities for contractual “gamesmanship”. In 1991, this resulted in a consultative form of the New Engineering Contract form of contract. The first edition was published in 1993.Broome JC, Hayes RW. (1997). A comparison of the clarity of traditional construction contracts and of the New Engineering Contract. International Journal of Project Management, 15, 255-261. Wider use of the NEC was recommended by the Latham Report in 1994.
NEC's history started in 1986 when Martin Barnes was commissioned to start drafting a contract to stimulate good project management. The first edition of NEC was launched in 1993. NEC2 arrived two years later, in 1995. NEC2 was used to build the High Speed 1 railway, between London and the Channel Tunnel.
NEC is a division of Thomas Telford Ltd, the commercial arm of the ICE.Thomas Telford Ltd., History of NEC, accessed 3 September 2021
NEC3 The NEC3 suite was launched in 2005 and it was fully revised in 2013 - NEC's 20th anniversary. This suite was used in projects such as Crossrail, London 2012 Olympic and Paralympic games,Thomas Telford Ltd., NEC Contracts, accessed 25 August 2021 Halley VI in Antarctica, and the Tin Shui Wai Hospital in Hong Kong. NEC3 was endorsed by the Construction Clients' Board (formerly Public Sector Construction Clients' Forum), Crown Commercial Services, the Facilities Management Board of the UK Cabinet Office, the South African Construction Industry Development Board, the International Organization for Standardization (ISO), the Association for Project Management (APM) and the British Institute of Facilities Management (BIFM).Thomas Telford Ltd., Endorsements, accessed 3 September 2021
The Hong Kong government decided to use NEC3 contracts generally for all government projects tendered in 2015/16. After a series of successful NEC3 projects in the region, the Hong Kong government announced in November 2016 that the NEC contract suite would be used for all future public works projects as far as practicable. Since 2017, Hong Kong has progressively moved to adopt NEC4.Hong Kong Institute of Construction Adjudicators, Public Consultation for the HKICAdj NEC4 Adjudication Rules, published 6 June 2019, accessed 30 May 2022
NEC4 NEC4 was announced in March 2017 and has been available since June 2017. This new edition reflects procurement and project management developments and emerging best practice, with improvements in flexibility, clarity and the ease of administration. It also introduced two new contracts: the NEC4 Design, Build and Operate Contract (DBO) and the NEC4 Alliance Contract (ALC). An NEC4 contract suite covering facilities management was released in 2021.Garrett, A., NEC4 - Facilities Management – more contracts, published 18 July 2021, accessed 12 September 2022
Several changes to terminology were introduced in NEC4, for example: The term "Employer" was replaced with "Client" "Scope" was used in place of "Works Information" The term "Risk Register" was replaced with "Early Warning Register".Hawkswell Kilvington, New NEC4 Contracts Announced, published 3 March 2017, accessed 31 October 2022
One former NEC3 clause which dealt with the "spirit" of the contract was divided into two clauses, to show that both aspects should be complied with: Clause 10.1: the parties and the service manager act as stated in the contract Clause 10.2: the parties and the service manager act in a spirit of mutual trust and cooperation.GMH Planning Ltd., NEC4 Term Service Contract – review of changes from NEC3, and NEC4 Engineering and Construction Subcontract – review of changes from NEC3, both accessed 28 November 2022
Characteristics The NEC is a family of standard contracts, each of which stimulate good management of the relationship between the two parties to the contract and, hence, of the work included in the contract, can be used in a wide variety of commercial situations, for a wide variety of types of work and in any location, and are clear and simple documents using language and a structure which are straightforward and easily understood. The contracts legally define the responsibilities and duties of Employers (the party which commissions the work) and Contractors (the party which carries out the work) in the works information. The contract consists of two key parts, divided between contract data provided by the Employer and that provided by the Contractor. The NEC3 complies fully with the Achieving Excellence in Construction (AEC) principles. The Efficiency and Reform Group of the UK Cabinet Office recommends the use of NEC contracts by public sector construction procurers on construction projects.
NEC documents use some of their own terminology in a specific manner, for example "compensation event" is a term used to encompass variations, losses and expenses, and extensions of time. The term implies that in some situations the contractor will be "compensated" with additional payment, e.g. for additional expenses incurred as a result of client actions, but financial compensation may not always arise and in some cases variations will result in a cost saving.Evans, S. C., NEC3 compensation events: a practical guide, published April 2013, accessed 13 June 2023
Contract family The NEC contracts now form a suite of contracts, with NEC being the brand name for the "family" of contracts.Thomas Telford Ltd., NEC3: April 2013 Edition complete family of contracts, accessed 6 September 2021 When it was first launched in 1993, it was simply the "New Engineering Contract". This specific contract has been renamed the "Engineering and Construction Contract" which is the main contract used for any construction based project. It now sits alongside a number of other contracts, making the NEC suite suitable for use in many stages of the lifecycle of a project and for any party within a project. The contracts available within the suite are:
Engineering and Construction Contract (ECC):
Suitable for any construction based contract between an Employer and a Contractor. It is intended to be suitable for any sector of the industry, including civil, building, nuclear, oil and gas, etc. Within the ECC contract there are six family level options, from which the Employer is to choose the most suitable and offer the best option/value for money on that project:
Option A: Priced contract with activity schedule Option B: Priced contract with bill of quantities Option C: Target contract with activity schedule Option D: Target contract with bill of quantities Option E: Cost-reimbursable contract Option F: Management contract
These options offer a framework for tender and contract clauses that differ primarily in regard to the mechanisms by which the contractor is paid and how risk is allocated and motivated to control costs.
The core clauses (of the main option listed above) are used in conjunction with the secondary options and the additional conditions of contract.
The clauses of these options have been be adapted for simpler less risky work (short contracts), for use as subcontracts, and for professional services such as design as below.
The Engineering and Construction Subcontract Contract (ECS)
Very similar in detail and complexity of contractual requirements to the ECC contract above, but allows the contractor to sub-let the project to a subcontractor imposing most of the clauses that she/he has within her/his headline contract. There is very little difference between the ECC and the ECS, other than the names of the parties are changed (contractor and subcontractor) and some of the timescales for contractual responses are altered to take into account the timescales required in the ECC contract.
The Engineering and Construction Short Contract (ECSC)
This is an abbreviated version of the ECC contract and most suitable when the contract is considered "low risk" (not necessarily low value) on a project with little change expected. This contract is still between the employer and contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer.
The Engineering and Construction Short Subcontract (ECSS)
Allows the contractor to sub-let a simpler lower risk contract down the line to a subcontractor. It is back-to-back with the ECSC but is frequently used as subcontract when the main contract is under the ECS.
The Professional Services Contract (PSC)
This contract is for anyone providing a service, rather than undertaking any physical construction works. Designers are the most obvious party to fit into this category. Whilst they are producing a design for an employer or contractor, they would sign up and follow the clauses within the PSC. Most of the clauses within this contract are the same or similar to those in the main ECC contract, so that all contractors, designers and subcontractors have broadly the same obligations and processes to follow as each other. The PSC can be used in a wide variety of situations with relatively little change required.Rowlinson, M. (2006), The NEC3 Professional Services Contract, Civil Engineering Surveyor, October 2006, accessed 26 January 2022
As with the ECC contract, there are several main options: Option A: Priced contract with activity schedule Option C: Target contract Option E: Time based contract Option G: Term contract. Options B, D and F do not exist.Barnes, R., NEC Professional Services Contract (PSC): the Consultants' Perspective, Paper presented to the Society of Construction Law in London on 8th March 2011, published August 2011, accessed 6 September 2021
The Professional Services Short Contract (PSSC)